Germany’s Air Passenger Tax Is Damaging - And Will Remain

The German federal government has published a study into the economic effects of its air passenger tax introduced in early 2011. The study comes to the conclusion that around 2 million potential passengers did not travel last year because the additional tax meant higher air fares. That is less than what the industry has calculated (a loss of 5 million passengers), but still a substantial effect.

Germany’s airline industry has had high hopes that once the study is out Berlin will recognize how damaging the tax is and will, like the Netherlands a few years back, scrap it soon. Officials were thrilled when Transport Minister Peter Ramsauer said that “the tax would actually have to go away” because of the negative effects on the local airlines.

The tax is €7.50 per passenger for every short-haul departure, €23.43 for medium-haul services and €42.18 on long-haul flights. Airlines have complained that particularly on short-haul they cannot simply pass the additional costs on to passengers, but that it is actually the carriers who have to pay most of it.

The problem is that in spite of these figures, the tax will not go away. Ramsauer has been vocally supportive of the industry during his tenure, but not actively. And, he is the Transport Minister, not the Finance Minister. The Finance Ministry has made the tax a part of its medium-term planning until 2016. Every year, airlines are now supposed to contribute €1 billion to the federal budget and that is on top of any financial burden coming from the European Union Emissions Trading Scheme (EU ETS). Germany needs every euro, it is as simple as that.

The case also clearly illustrates that in spite of all recent efforts like inventing a new trade association, BDL, the industry still does not have the necessary profile needed to avoid new financial burdens like the tax.

But the irony is that one part of the industry is much more affected than another. In the end, it is the low cost sector that is suffering the most. Lufthansa can be far more relaxed and watch its competitors cut back on German routes.